Lessons from RCom mess: Exit of the weak boosts profits for the survivors

Why are downturns in India so long? One factor is the slow exit of firms

In his column in Business Standard on Saturday, T N Ninan showed the gloomy environment of private businessmen facing difficulties. There are major difficulties in the Indian arrangements of the relation between the state and the market. But there is a silver lining: The exit of the weak boosts the profits of the survivors through higher output prices and lower input prices. This process of exit is accelerated by the bankruptcy reform. Greater leverage fosters less sentimental decisions. When exit is swift, business cycle downturns are shorter.